PARIS (Reuters) – The luxury group Hermès announced on Friday that it would increase its prices as its sales exceeded those of its competitors at the end of 2023, contributing to a jump in its stock which reached its highest level in the morning.
The group’s sales stood at 3.36 billion euros in the fourth quarter, up 17.5% at constant exchange rates, exceeding analysts’ expectations of 14%, according to a Visible Alpha consensus.
The company indicates in a press release that it was driven by strong growth in all regions, particularly in Japan, despite a high basis of comparison in Asia and America.
Hermès said it was also driven “by good momentum” in China, where investors were concerned about the slow pace of the post-COVID-19 recovery.
The company therefore plans to increase its prices globally by 8% to 9% this year, group manager Axel Dumas told journalists.
It will also pay a bonus of 4,000 euros to each of its 22,000 employees around the world.
On the Paris Stock Exchange, Hermès shares rose 6.07% to 2,200 euros at 1:13 p.m. GMT, at the top of the CAC 40 index which remained relatively stable at the same time at 0.02%.
These results are welcomed by analysts, notably those at JP Morgan who note “strong brand momentum in all product categories and in all regions, a well-invested operating base which benefits from continued leverage and strong returns on investment for shareholders.”
Hermès is “still the fastest growing luxury brand,” Citi said in a note.
The brand is known for outperforming its competitors when economic conditions deteriorate, thanks to its classic designs and careful production and inventory management, which helps maintain the brand’s aura of exclusivity.
For Bernstein analysts, “it is important to note that leather goods are in the lead and showing double-digit growth over the quarter, defying the usual end-of-year lull.”
Handbags such as the coveted Birkin model, worth more than $10,000, are only accessible to the wealthiest buyers, generally more sheltered from economic vagaries.
Last year, Hermès had already increased its prices by around 7% worldwide to take into account rising production costs.
Hermès’ valuation is higher than its rivals, with a 12-month price-to-earnings ratio based on a projection of 48.6, according to LSEG data. In comparison, LVMH stands at 24.8 and Kering at 16.5.
(Report by Mimosa Spencer and Ingrid Melander, French version by Gaëlle Sheehan, with the contribution of Diana Mandiá; edited by Kate Entringer)
©2024 Thomson Reuters, all rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. “Reuters” and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.